Mortgage Remains Largest Part of Household Debt

Mortgage Remains Largest Part of Household Debt

Overall mortgage debt rose one percent from 2012 to 2015

In their recently released quarterly report, the New York Fed stated that overall mortgage debt has increased only by one percent between 2012 and the end of 2015. The overall percentage of household debt made up of mortgage debt has actually decreased from 2008 to the end of 2015, dropping from 79 percent to 72 percent.

Currently, the value of all outstanding mortgage debt in the U.S. stands at $8.74 trillion dollars. The report also shows that more homeowners are making an effort to reduce or pay off their mortgages, paying off 3.5 percent (some $288 billion) of the overall mortgage debt in 2015. Prior to the housing crisis, Americans paid only 2.1 percent ($170 billion) of the outstanding $8.25 trillion mortgage debt of 2006.

There are a number of factors that have kept the mortgage debt growing at such a slow pace. The housing market itself has slowed down, with fewer homes selling now than prior to 2008. Interest rates are also down, dropping from 7.65 percent in 2000 to 3.85 percent in 2015, plus equity use has dropped. In the immediate post-crisis years, it became more difficult to refinance, which resulted in more homeowners paying on their mortgages longer. This, in turn, meant that many were paying more directly towards the principal instead of the interest, decreasing the overall debt every month.

Other information provided from the quarterly report shows that the number of delinquent payments has also decreased.